Southern Cross Travel Insurance fined $1.1m for misleading discount claims

Southern Cross has paid $1.1m to the Crown for breaches of fair trading laws.

Southern Cross Travel Insurance has been ordered to pay $1.105 million to the Crown after it admitted making misleading statements about discounted premiums.

An investigation by the Financial Markets Authority (FMA) found Southern Cross Benefits made misleading representations about Southern Cross Travel Insurance discounts to prospective customers.

The FMA said Southern Cross customers were offered a discount for being a member of the insurer’s Medical Care Society, for buying its travel insurance policy online, and for buying a travel insurance policy using certain promotion codes.

However, while statements on the insurer’s website and emails to customers represented that discounts would be applied to their entire premiums, they applied only to base premiums.

The total difference between the discounts the customers received and those they would have received had the discounts been applied to their entire premiums was $3,501,221.

The FMA said that Southern Cross Travel Insurance intended that the discounts would apply only to the base premiums, but did not communicate this clearly to customers.

FMA head of enforcement Margot Gatland encouraged people to check their insurance documents and complain if they were not paying the correct premiums.

“This enforceable undertaking confirms that insurers are required to ensure representations they make to customers about potential discounts can be delivered, and that customers are treated fairly.”

Southern Cross Travel Insurance interim chief executive Anita Hawthorne said: “As a customer-focused organisation, we want to do what is right by our customers.

“In 2023, we identified that, since 2001, some of our communications to customers did not explain that discounts only applied to the base premium. The discounts were for being a member of Southern Cross Health Society, purchasing a policy online, and for purchasing a policy using a promotional code.

“We identified this issue and self-reported it to the Financial Markets Authority. We contacted affected customers to apologise, paid refunds and have strengthened our processes to ensure this doesn’t happen again.”

The FMA said the breaches related to sections 21 and 22(d), (f) and (h) of the Financial Markets Conduct Act.

Southern Cross fully remediated customers affected by the discounts.

Tom Raynel is a multimedia business journalist for the Herald, covering small business, retail and tourism.